The US Securities and Exchange Commission (SEC) has sent requests for information as well as subpoenas to a number of cryptocurrency hedge funds recently. The regulators demanded to know how funds priced investments in cryptocurrencies and about their compliance with client money protection requirements, three sources who asked to remain anonymous told Bloomberg.
Some of the information requests were issued by the SEC Office of Compliance Inspections and Examinations, which can refer its findings to the agency’s enforcement unit if it finds any misconduct. In fact, a number of crypto hedge funds have already received subpoenas from the SEC’s Enforcement Division, which can penalize companies if it decides it is needed. “The SEC has taken a very deliberate approach in this space,” said Peter Van Valkenburgh, director of research at Coin Center, a Washington-based advocacy group. “I think they are just trying to get a handle on the large ecosystem.”
ICOs Are the Target or the Excuse?
The SEC has also requested to know if the hedge funds have properly disclosed any potential conflicts of interest, for example their managers having personal holdings in initial coin offerings (ICOs). And at least one of subpoenas for the hedge funds was specifically about its investment in an ICO. In another case, SEC enforcement attorneys interrogated investment banks about their dealings with token sales. The agency was also apparently concerned with companies using Simple Agreements for Future Tokens(SAFTs) to bypass ICO regulations.
ICOs have been in the sights of the SEC recently and they are supposedly to blame for the agency’s new-found interest in crypto hedge funds. A couple of weeks ago it was revealed that the SEC had issued scores of subpoenas against companies in the field.